If expectations for long-term inflation rose, but the slope of the SML remained constant, this would have a greater impact on the required rate of return on equity, rs, than on the interest rate on long-term debt, rd, for most firms. Therefore, the percentage point increase in the cost of equity would be greater than the increase in the interest rate on long-term debt.
Answer the following statement true (T) or false (F)
False
Rationale: Increased inflation results in a parallel upward shift in the SML, which means equal percentage increases in the required return on debt and equity.
You might also like to view...
Believing that your group is at the "center" of all other groups is called
A) racism B) ethnocentrism C) discrimination D) prejudice
A Brazilian manufacturer of solar cells used as a renewable source of energy in all types of structures would like to begin distribution and sales in the United States, Canada, and Mexico. The manufacturer has hired you to investigate NAICS data for such products in North America. What is the NAICS system? What other helpful kinds of information can be found in this source?
What will be an ideal response?
Suppose parties to a contract that is under the UCC fail to specify some term. The UCC:
a. provides appropriate remedies for the breach created by that failure b. provides for a special master to arbitrate all open terms c. supplies all necessary terms to complete any commercial contract d. requires the terms to be completed before it recognizes a valid contract e. none of the other choices
A city contributes $500,000 to a corporation as an inducement to locate in the city. Within the next 12 months, the corporation uses the money to purchase property worth $500,000. The corporation has income of $500,000 and must reduce its tax basis in the property by the same amount.
Answer the following statement true (T) or false (F)